RE-AUCTION WINNERS ASK FCC TO DENY NEXTWAVE LICENSE REINSTATEMENT
Alaska Native Wireless (ANW) and VoiceStream filed petition at FCC late Thurs. asking agency to deny reinstatement of NextWave’s PCS licenses and contending recent $2.5 billion investment agreement by UBS Warburg gave banker “de facto control.” Petition also challenged proposed $300 million investment by Qualcomm, saying stake would call into question NextWave’s independence and adherence to FCC licensing requirements. Qualcomm investment “could substantially impair NextWave’s ability to implement its own business and policy decisions regarding build-out, deployment and spectrum usage, particularly if NextWave is unwilling to lose Qualcomm as a source of needed mobile virtual network operators customer contracts,” petition said. Petition was filed on same day that U.S. Appeals Court, D.C., was scheduled to hand down remand mandate of decision that overturned FCC decision to cancel NextWave licenses for nonpayment. FCC wasn’t planning to appeal to U.S. Supreme Court decision by D.C. Circuit Aug. 23 that rejected Commission’s request for stay of mandate, source said (CD Aug 27 p2).
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ANW, designated entity in which AT&T Wireless has noncontrolling equity stake of 39.9%, and VoiceStream last month also filed petition challenging eligibility of NextWave to regain C-block licenses (CD July 20 p2). That petition focused on NextWave compliance with foreign ownership restrictions and its designated entity status. Verizon Wireless, largest winner in C- block re-auction that FCC held in Jan., had joined first petition but wasn’t part of filing Thurs. ANW and VoiceStream also won licenses in Jan. rebidding, which involved licenses that belonged to NextWave before cancellation and which produced $15.4 billion bid in re-auction. ANW and VoiceStream said Thurs. petition to deny reinstatement was based on “new information” that was part of proposed plan of reorganization and related filings made by NextWave in U.S. Bankruptcy Court, White Plains, in last few weeks. Those filings, which contain investment information and financing terms, make “plain that the Commission must deny reinstatement of NextWave’s former licenses or, at a minimum, conduct further investigation and audit of NextWave’s recently filed information.”
UBS Warburg said earlier this month that it would provide NextWave with $2.5 billion in debt financing to underwrite construction of its planned CDMA network (CD Aug 22 p7). Bankruptcy court filing, which described terms of loan, also said UBS has been engaged to serve as company’s financial adviser and to assist in completing its proposed reorganization plan. Jointly filed ANW-VoiceStream petition raised concerns about factors that proposed agreement would allow UBS to control, including: (1) Availability of any financing, other than $1 million in total vendor financing. (2) Terms and conditions of such financing. (3) Manner in which NextWave could spend proceeds of any such financing. (4) Way in which NextWave would conduct buildout of network. (5) Identity of NextWave’s resale partners and term of resale contracts. (6) Final, “detailed” business plan. (7) Senior managers.
“NextWave has again demonstrated that its business model is unworkable and that it will not qualify under FCC regulatory guidelines for holding C- and F-block licenses,” ANW Managing Dir. Conrad Bagne said. Brian O'Connor, VoiceStream vp-legislative and regulatory affairs, said “NextWave’s attempts to ‘game’ the guidelines” had deprived consumers of use of spectrum and had denied U.S. Treasury “much-needed revenue.” NextWave spokesman said late Thurs. that company wouldn’t have comment until it had chance to review filing.
In meantime, pending challenges at Commission on NextWave’s eligibility to hold licenses and foreign ownership compliance mean FCC now must follow typical regulatory procedures it would use on status of any license ownership, agency source said. Issuance of remand mandate, which hadn’t been announced by our deadline Thurs., simply would take NextWave back to where it was in qualifying process when licenses were cancelled for nonpayment in 1997, source said. While petition earlier this summer by ANW, Verizon and VoiceStream had questioned NextWave’s foreign ownership status, those questions also were raised in 1997 when 2 failed C-block bidders, Antigone Communications and PCS Devco, asked Commission to dismiss NextWave’s conditional license approval based on alleged violations of foreign ownership limits. Before FCC took final action on that petition, NextWave licenses were cancelled for nonpayment, source said. Point of D.C. Circuit ruling was focus on license cancellation decision and how that intersected with U.S. Bankruptcy Code, source said. Ruling doesn’t appear to bar Commission from engaging in any other aspect of regulatory process that eligible license-winners undergo after auction closes, source said.
Petition filed Thurs. urged FCC to not reinstate licenses until questions raised by its filing and other petitions were resolved. Petition said licenses originally were granted on conditional basis and “proposed bankruptcy reorganization, at a minimum, constitutes a pro forma transfer of control for which NextWave must receive express Commission approval.”